The Qube Exchange

The following post was contributed by a guest blogger who is an agent at a local brokerage here in NYC.

A local sage once told me that the two most stressful things that Americans will ever experience are divorce and buying a home for the first time. We can only hope that the latter does not directly correlate to the former.

For those of you who have worked 14-hour days in stifling, dimly-lit cubes and regularly cursed the IRS for the gaping hole in your bi-weekly paychecks, all in hope of one day earning enough money to buy a home—this cheat sheet to home-ownership is for you.

How deep are your pockets? Before you start touring open houses and running to your spouse with the “I will die if I can’t have this house,” plea, figure out if buying a home is plausible. Falling in love is not worth the risk of foreclosure. Keep in mind that monthly mortgage payments, the cost of moving, unforeseen repairs or renovations, insurance, maintenance, and property taxes will probably amount to more than you are paying in rent. If Starbucks and rent are devouring most of your income, chances are that you should hold off on buying. However, if you can put away a nice chunk after you pay your current monthly housing costs, then you might be ready to take the next step.

Co-op or Condo or Private Home? (Not a trick question)! Initially, first-time buyers might be attracted to co-ops, buildings which are owned by private corporations. Co-ops are generally listed for less, have lower closing costs, and offer more square footage per dollar than condos. However, co-op boards can be more exclusive than country clubs when it comes to keeping out the “riff-raff.” Financials are typically scrutinized, and hefty liquid assets are usually required. Finally, co-op boards have the final say when it comes to pets, subletting, and renovations—even when you’re in, you’re not home-free. Something as small as snow boots in the hallway could be enough to raise hysteria among board members. Condo units are real property—they are owned as if they were private houses. All things being equal, condos are more expensive than co-ops from the asking price to the closing costs. While the minimum down payment for condos can be as little as 10 percent, do not sign your life away just yet. It’s not rocket science—the less you put down, the more you will pay in principal and interest on a monthly basis. The real perk of condo ownership is the luxury of being left alone to a large extent. Condo owners can usually rent out their property or use the property as a part-time residence without much hassle. All in all, condos are harder on the wallet but somewhat less stressful on the psyche. What about private home ownership—after all, who wouldn’t want a spacious sanctuary, possibly accented by a porch, a pool, or acreage? It’s not necessarily as glamorous as it sounds. People who are not handy or unwilling to pay for professional maintenance will face quite a shock when the roof leaks, the boiler breaks, and mice decide to drop in. Depending on the prestige of the neighborhood, high property taxes could make your McMansion a McMoney-Pit. Owning a private home is the American dream realized, but just make sure to account for “incidentals” before assessing your dream home’s affordability.

Are you a good risk? Or do you still owe library books from 1985? A quick indicator of how much you can spend on your new home is your pre-qualification for a mortgage. Getting pre-qualified is an absolute MUST when shopping for a home—it will not only plant you firmly in reality, but will show sellers that you are a serious, viable buyer. How much your mortgage lender is willing to give you depends on a few key things: income (before taxes, thank God), your existing debt, and your credit (not whether or not you have a Barney’s card, but whether or not you pay the bill is what counts here).

I wish I may, I wish I might. We all “want it all.” For the first-time buyer, the odds of “having it all” aren’t the greatest. On to Plan B—make a down-to-earth wish list of the things that are most important to you. Think about neighborhood—would you prefer to be near gourmet markets or a good school district? Do you need to be steps to a gym or close to a park? Which special features are really necessary? Would you be willing to sacrifice “Jacuzzi jets” for a bigger home? Keep an open mind and just remember that everything in life is a compromise.

Compare and Contrast. Shop around! See what’s out there so that you can educate yourself about the market. Use the help of a real estate agent from a reputable firm or look in the newspaper for open house schedules. Like dating, you will eventually get the visceral feeling that you “hate everything” or that you “have found the one.” And like a marriage proposal, before you make an offer, make certain that you know what you’re getting yourself into. Investigate the condition of the apartment, know the circumstances of the sale, and understand the market value. If you’re not planning on trading-up anytime soon, this could be a long relationship.

Sealing the Deal. If you put in a bid and it’s accepted, make sure that you agree with all of the contingencies in the contract of sale. An inspection might be a good idea to uncover any structural or environmental issues associated with the home, and the seller should be reminded that the basic systems should be in working order before the closing. Find out now if the chandelier is staying or going to avoid petty arguments at the closing. In case you couldn’t already guess, get everything in writing.

Need a cocktail? Well, it’s not all that bad. Who knows—you just might get to enjoy that next cocktail in the comfort of your brand new and very first home!